Lawmakers tackle property insurance

Wednesday

Mar 26, 2008 at 12:01 AM

One idea is to keep a freeze on Citizens Property Insurance rates.

By LLOYD DUNKELBERGERSun Tallahassee Bureau

TALLAHASSEE - While Florida lawmakers have eagerly embraced plans to slash property taxes, the House and Senate may have more difficulty finding agreement on another major cost dragging down the state's real estate market: property insurance.

A plan unveiled by the Senate on Tuesday would cap property insurance rates for another year for customers of Citizens Property Insurance, the state-run insurance fund that is now Florida's largest residential insurer. But in an effort to slightly reduce the state's financial risk in the case of a major hurricane, the Senate also backed a bill that would reduce the state hurricane catastrophe fund by $3 billion, although that could lead to a statewide rate hike in the range of 3 percent.

"This is not a perfect solution,'' said Senate Banking and Insurance Committee Chairman Bill Posey, R-Rockledge. "It's just the best one we know.''

The Senate and the House appear to be favorably inclined to back a plan from Chief Financial Officer Alex Sink that would reduce the state's exposure in the hurricane catastrophe fund by $3 billion, from its current $28 billion level.

But Senate analysts warn lessening the state's role in providing cheaper reinsurance could lead to rate hikes in the range of 1.5 percent to 3.4 percent statewide because insurers will have to replace the state reinsurance with more costly private reinsurance. In some areas, such as Miami-Dade County, the rate increases could exceed 8 percent.

Sink, though, urged insurance companies not to use the occasion to dramatically increase their rates.

Turning to face an audience of insurance lobbyists, Sink said: "You're going to have me to deal with and trust me you don't want to deal with me.''

House Speaker Marco Rubio, R-West Miami, indicated Tuesday that the House may go along with the Senate plan to continue the rate freeze for Citizens, which now has 1.3 million policies. Citizens' rates were frozen last year but the freeze will expire on Jan. 1 unless lawmakers act.

The Senate plan would continue the freeze until 2010 and then further limit increases through 2012 to no more than 10 percent a year, or 15 percent in the case of wind-only policies.

But some senators and House members believe Citizens' rates need to be increased to more accurately reflect the state insurer's risk. And they argue that if Citizens has another deficit - like it had after the 2004-05 hurricane seasons - it will result in an assessment on all non-Citizen insurance policies, including auto and commercial policies. "When the wind blows all non-Citizens policyholders will pay to bail Citizens out,'' said Sen. Al Lawson, D-Tallahassee, who voted against the rate freeze.

Lawson and Sen. J.D. Alexander, R-Lake Wales, also opposed another provision in the bill (SB 2860) that would let Citizens begin offering coverage to homes valued at $1 million or more. Lawson said it was not fair to have non-Citizens policyholders potentially "subsidize'' wealthy homeowners who can afford to live on the coastline.

"This is like the reverse of Robin Hood,'' Lawson said. "You're robbing from the poor to take care of the rich.''

Alexander said it was difficult to ask residents in his Central Florida district to pay assessments to cover Citizens' deficits. He also warned that although the Legislature is moving to slightly reduce the state's financial risk in the catastrophe fund, Florida would still face billions of dollars of potential losses that will be difficult to cover.

"This state has undertaken risks that we can't write the check for,'' Alexander said.

"The proposed legislation contains numerous consumer protections that would safeguard Floridians from unwarranted and unsupported property insurance rate increases,'' McCarty said in a statement. "It also would give my office greater ability to regulate insurance companies by way of increased enforcement authority and more control over the complete rate-filing and review process.''

Among the key provisions cited by consumer groups is the prohibition against letting insurers raise their rates and then ask for state approval.

Sen. Steve Geller, D-Cooper City, called dealing with the cost of property insurance "the single biggest problem facing the state.''

But he said he was worried that many of the provisions in the Senate package could be opposed in the House, where leaders generally favor a "free market'' approach versus an increased role for state regulators.

"The problem is we're moving in one direction and the House is moving in exactly the opposition direction,'' he said.

The insurance plan could also face opposition from insurance and business lobbyists who continue to argue that the high financial risk that the state faces could hurt residents as well as the economy.

Barney Bishop, head of Associated Industries of Florida, said while he likes Sink's proposal to reduce the catastrophe fund risk, Florida is still facing "far too great of a fiscal threat to our hardworking citizens and the livelihood of the state.''